“A version of Apple’s iPhone lacking Wi-Fi capability has made progress towards obtaining a Network Access License (NAL) from the Ministry of Industry and Information Technology (MIIT), although a trademark dispute could set back its launch, sources told Interfax on June 11.

A China Unicom marketing employee, who asked not to be identified, said that the Wi-Fi-disabled iPhone had passed the tests of the State Radio Monitoring Center and obtained a five-year valid Radio Transmission Equipment Type Approval Certificate (RTETAC), which is one of the requirements for getting MIIT’s NAL. The model submitted for testing was compatible with GSM, WCDMA and Bluetooth, although it lacked Wi-Fi, according to the source.

Interfax previously reported that Apple prepared both Wi-Fi and non-Wi-Fi iPhones for the tests, as under Chinese regulations, Wi-Fi phones can only be granted NALs if they are also capable of the Chinese-developed wireless technology, WAPI (WLAN Authentication and Privacy Infrastructure).

The China Unicom marketing employee said that the iPhone still has a number of tests to pass before it can receive an NAL, including electromagnetic interference, trial operation, China Compulsory Certification tests, local support and after-sales support system evaluations and many others.”

Update – June 11, 2009:For several months now, iPhonAsia has read purported “insider leaks” about iPhone network testing in major Chinese provinces (Unicom testing iPhone in Henan and Heibei?). From what we heard, iPhone 3G was passing these unofficial WCDMA 3G network tests (conducted by Apple and China Unicom engineers in prep for formal MIIT tests) with flying colors. Moreover, there are now current iPhone 3G owners in China who have begun using China Unicom’s new WCDMA network with no reported problems.

Despite these unofficial reports, we’ve now hearing from MIIT’s China Telecommunication Technology Labs (CTTL). In response to media inquiries, CTTL clarified that Apple’s iPhone has received only one (1) of the two (2) required MIIT licenses:

So what gives? There could be many reasons for MIIT holding up iPhone’s Network Access License (NAL), such as Apple submitting a special new iPhone model for China with WAPI encryption? It could also be that “parties” have requested that MIIT not reveal the iPhone NAL until the formal Apple/Unicom deal has been announced? Or something under the “other” category? It’s all just guesswork for now. We’ll update this post when we learn more.

MIIT approves iPhone for sale in China??

June 11, 2008 – If my source is correct, China’s Ministry of Industry and Information Technology (MIIT) has quietly approved the iPhone 3GS (or special China version). MIIT approval is a key prerequisite to iPhone’s official launch in China. I should stress that this is unofficial news …

“iPhone has already passed various tests, and approved to be sold in China on May 7th 2009. Approval number 2009-1996, device code 2009CJ1996.”

Marbridge Consulting is carrying a story today about China’s Ministry of Industry and Information Technology (MIIT) approval of a WiFi capable 3G phone by Motorola. This appears to be the first WiFi 3G handset approved by the MIIT. The previous MIIT policy was to not allow WiFi on 3G mobile phones. The approval came about because of Motorola’s inclusion WAPI encryption. WAPI is China’s homegrown standard, an alternative to 802.11 (called WiFi). This appears to be the first mobile handset to integrate both WiFi and WAPI protocols. Read more about China’s morphing WiFi/WAPI polices > HERE

Will Apple follow Motorola’s approach and include both WiFi and WAPI in a new iPhone for China? iPhonAsia believes that this is a distinct possibility. We should have the answer in a matter of weeks.

EXCERPT: Motorola China’s vice president of sales, Wen Tao, confirmed the company will release a Wi-Fi capable WCDMA handset in China by the end of this month or early next month at the latest. Currently, no Wi-Fi enabled handset has received a mobile network access permit from the Ministry of Industry and Information Technology (MIIT). Wen said the handset, called the A3100, received permission because it supports both Wi-Fi and WAPI wireless networking standards. Read full post> HERE

China’s Internet growth defies global economic downturn

If China is suffering under the global economic downturn, you wouldn’t know it judging by the growth in the number of Chinese netizens. In Q1 2009, Chinese Internet users grew by 16.2 million, reaching a total of 316 million. This growth is on top of a stellar 2008 when China’s Internet users increased by an astounding 41%!

Xi Guohua

Over 90% of netizens are on high-speed (broadband) connections. This fresh data comes from Xi Guohua, Vice Minister of China’s Ministry of Industry and Information Technology (MIIT). Xi noted that; “while the global financial crisis brought impact to the real economy, China’s Internet industry did not slow its development speed.”

The Vice Minister further revealed that during the past year, China’s e-commerce market scale was estimated at CNY3 trillion, a year-on-year increase of 41.7%; the scale of the online advertising market was about CNY12 billion, a year-on-year increase of 55.8%; and the scale of the online games market was between CNY19 billion and CNY20 billion, a year-on-year increase of about 50%. More> HERE

China unveils new Internet payment protocols

Xi Guohua

During an April 18, 2009 speech at the Boao Forum for Asia, Xi Guohua, Vice Minister MIIT, highlighted the importance of the Internet on the Chinese economy. Xi noted that e-commerce has great potential in China, but currently China lacks two essential conditions:

An Internet payments credibility system and

An online certification system to enable wide promotion of online businesses.

To emphasize the need for a new system, Xi Guohua quoted from a recent survey; “…more than 80 percent of Chinese Internet users were worried about the security of their online personal information even though they had installed anti-virus software on their computers.”

Only two days after Guohua’s speech (April 20, 2009), new information on China’s e-commerce “credibility and certification” programs has emerged via a notice from the People’s Bank of China (PBC). Apparently the PBC will help to administer a new registration and certification program developed by China’s Ministry of Finance and the China Banking Regulatory Commission. The PBC notice states that all non-financial organizations that are engaged in payment and settlement businesses in China, including Internet platforms (e.g. Tencent, Alipay, iTunes) must fully register under the new guidelines before July 31, 2009.

How does this impact Apple and the iTunes Store? Details on the program are vague, so it’s hard to say. However, if this new system brings Chinese citizens greater comfort over Internet commerce, then it could be very positive.

There are untold millions of Chinese consumers who avoid Internet transactions altogether. Whether jaded over prevalence of PC viruses or miss-trust of putting financial data on a website, the vast majority in China do business in cash only.

As former Beijing resident and iPhonAsia reader Steve M explains;

“Very few people own an international credit card in China, and if they did, they would never use their credit card on the Internet – they do not trust the Internet for any transactions.” …. “The concept of buying legitimate apps in an online store is still a new idea. I predict Chinese consumers will want as many cool apps on their iPhones as possible when they find out how easy it is to download them from the iTunes Store. But first, Apple needs to ‘localize’ the store for China*by making the site in Chinese and changing the payment method.” …

Steve continues;

“Starbucks is very popular in Beijing. Tens of thousands of Beijingers pay for lattes everyday in a country that is known for its tea. For the price of one latte, Starbucks customers could easily buy 3 or 4 apps in the iTunes store. The demographics of Starbucks customers are similar to the demographics of people who buy iPhones in China.”

iPhonAsia is cautiously optimistic that this new e-commerce program in China may help to address some of the Chinese consumers’ concerns about buying online. However, Apple and China Unicom may need to do more – they may need to expand the list of authorized credit/debit cards (iTunes currently accepts only internationally recognized cards) and take further marketing, promotion and logistical steps, such as:

Promoting the ease of use and security of e-commerce via iTunes.

Getting the word out to Chinese consumers that viruses don’t infect Apple products the way they do Windows devices. Seriously, the frequency of “PC blue-screens of death” has tainted all hardware in China and Apple may need to help paranoid consumers understand that you don’t get viruses on iPhones, iPod Touches or Macs.

Expand iTunes credit card options to include more regional cards.

Fully localize the iPhone, iPod Touch and iTunes China Store**

Include several “for China” apps on a new special for China iPhone (e.g. Youku or Tudou versus Youtube)

*NOTE: The Apple iTunes China store has been available for several months now (app downloads to iPod Touch onlyfor now). If you go down to the bottom of your iTunes Store window you can select from stores in any available region, including Hong Kong and China. If you peruse a store outside your region, don’t forget to reset your store to your home location or you won’t be able to make any iTunes purchases.

**NOTE: Apple and firms such as Extend Logic and Loc Labs appear to be working diligently on efforts to localize and internationalize iPhone and the iTunes China Store. Look for an Apple China iTunes Store makeover … soon.

Beijing. December 12. INTERFAX-CHINA – China’s Ministry of Industry and Information Industry (MIIT) will issue 3G licenses to telecom operators by the beginning of 2009, although operators must meet three preconditions before it will do so, the MIIT minister announced at press conference on Dec. 12.

“The MIIT plans to issue a TD-SCDMA license to China Mobile, a CDMA2000 license to China

Li Yizhong

Telecom and a WCDMA license to China Unicom at the end of the year or the beginning of 2009,” Li Yizhong, minister of MIIT said.

Although Li emphasized that the licenses will be issued soon, he said that the exact date is still to be confirmed.

Li said that operators must meet three preconditions before they will be issued with 3G licenses. First, operators must make their 3G development roadmaps and network plans public and submit them to the government. Second, operators must guarantee that their 3G network construction work will avoid redundancy of network resources and will boost the development of the macro economy. Third, China Mobile’s construction of its TD-SCDMA network must reach a point at which it will be competitive with the 3G networks of the other two operators.

“3G licenses will be issued soon after the three pre-conditions are fulfilled.” Li said.

Li pointed out that the three operators have already prepared technology and capital reserves for investment in their respective 3G services.

“The MIIT estimates that operators will invest a total of RMB 200 billion ($29.22 billion) in 3G services in 2009. This will provide a significant driving force for the economy,” Li said.

Interfax reported recently on concerns that China Unicom’s WCDMA license will be held due to a dip in EU-China relations after the French president and current holder of the rotating EU presidency, Nicolas Sarkozy, met with the Dalai Lama on Dec. 6. European firms are set to receive patent payments as a result of the deployment of the European-developed WCDMA standard by China Unicom.

“The political situation is very sensitive and uncertain at present. Li’s confirmation that China Unicom will receive a WCDMA license is good news. However, the exact date of the issuance of the WCDMA license is very important. Hopefully, the MIIT will not treat China Unicom differently. However, China Unicom is prepared for whatever happens,” a China Unicom insider, who wished to remain anonymous, said.

On Dec. 11, the MIIT announced on its Web site that the three operators had signed a framework agreement on network resource sharing based on the regulation issued by the MIIT and State-owned Assets Supervision Administration Commission (SASAC) on Oct. 6. The framework agreement regulates cooperation, network sharing, joint network construction, investment, ownership, rights of use, maintenance responsibilities and methods for solving disputes.

There is still much speculation as to the precise date when 3G licenses will be issued.

Xi Guohua

Xi Guohua , vice minister of the MIIT, said at the end of November that 3G licenses will be issued by the end of the year. Industry rumors put the precise date at Dec. 15. Others have revised this to some time in February, 2009.

Interfax commentary: After nearly eight years of talk, 3G in China will soon become a commercial reality. The government’s desire to incubate the homegrown TD-SCDMA 3G standard and its distaste for competing standards have been demonstrated by the headstart granted to China Mobile’s TD-SCDMA construction. This has been confirmed by the support given to the operator by the preconditions attached to the award of the licenses. However, TD-SCDMA has already received poor feedback from commercial trials, giving rise to expectations that 3G in China may prove less a success in its own right and more as a learning experience for 4G services, to which many in the industry are already looking.

Preamble: The following is a SWAG and I will no doubt be wrong about plenty … yet I believe there is some basis for the following negotiation scenario and my speculation over forthcoming changes in China’s telecom industry. FWIW …

Apple negotiating team to China Mobile team:

“We’re coming out with a 3G iPhone and the chipset will support important world standard 3G protocols including TD-SCDMA including W-CDMA. And oh by the way, this new iPhone will be seriously “hack proof” (okay, much tougher to hack).

China Unicom tells us their CMDA mobile division is being acquired by China Telecom (TBA post Olympics). China Uniom will then merge with China Netcom and the combined company will be granted a 3G license and rights to build out the (proven) W-CMDA 3G network.They want an iPhone exclusive and they’re making a compelling pitch to us:

1)They say W-CDMA 3G is going to eat TD-SCDMA for lunch and they’re going to steal away millions of your most coveted subscribers … those on contract with a data-plan.

2)Unicom/Netcom wants to jumpstart their new TBA 3G mobile business by offering subscribers the most sought-after smart-phone for Net-surfing fun, “wow” audio/visual and intuitive UI – the iPhone.

3) Unicom/Netcom has heard the rumors about 400,000 unlocked iPhones on your (China Mobile’s) network. If we (Apple) sign an exclusive with them, they plan to offer iPhone subscribers very competitive rates and an unlimited data-plan option. Say good-bye to 9 out of 10 of your iPhone customers.

We know that you’ve (China Mobile) been growing subscribers at a clip of 5 to 8 million per month. Congratulations! We also know that despite this growth, your average revenue per user (ARPU) has not hit your targets. We understand that a key strategy for China Mobile is to grow your value added services (e.g. Monternet platform and other mobile data services). And finally, we know how critical mobile TV and delivery of video is to your future growth plans.

There is no phone that offers audio/visual and boosts data use like the iPhone! … Ask Google or any carrier who has officially launched iPhone.But then again, we know you’ve already asked … Net surfing increases 50 times and overall data-usage doubles or triples!

The iPhone is not a prisoner to fixed buttons.It runs OSX and software upgrades allow iPhone to evolve.It will only get cooler. You don’t need to spend a dime (.7179 Yuan Renminbi) or lift a finger … we’re going to cover all costs and handle delivery of these upgrades … quick and simple via iTunes.We want to do the right thing and make these upgrades free to all iPhone owners. Software updates will improve user experience and encourage maximum data use. We are offering significant value here and this does not come without cost to Apple.All we are asking is a small share of your monthly data-plan revenues to compensate for this value and expense.A happy iPhone owner is a retained “on contract” customer!

There is one more important value-add that comes with iPhone … our amazing developer community! Wait till you see the SDK unveiling. Our software development kit (SDK) will bring a whole slew of new apps to iPhone. All Apple and developer community apps will be delivered via iTunes. Again, no cost to China Mobile. Showtime in a just few days! 谢谢开发商! “

End of pitch …

Now if competitive dynamics take too long to evolve in China (i.e. 3G licenses or restructuring of telecom industry are delayed into 2009), China Mobile might not feel compelled to capitulate (agree to any terms Apple may desire) … Not a problem for Apple.They can offer a fully sanctioned “unlocked” iPhone without an exclusive carrier deal. This distribution could easily be done via deals with D-Phone, Shenzhen Aisidi, Apple.com (China) online and via new Apple stores in China. It will be a premium-priced iPhone, but not above the price that black-market buyers are currently paying.

Carriers offering both a locked and unlocked option: I have received some justified critique for implying (via this post) that iPhone can be made hack proof. I will concede that for every lock there is a locksmith and while a next gen iPhone can be made more hack resistant, it will not be hack proof.

Don’t be surprised if we see a two-tiered offering for next-gen iPhone (ala Orange in France where law prohibits handsets from being locked to a network for more than 6 months) – a locked iPhone in each nation and an “official” unlocked iPhone at a modest premium price. If the premium is too high, black-marketers will engage in arbitrage (unauthorized unlocking options at a lower cost). If the premium is modest, or “just right,” buyers will opt for the “official” easily upgradable iPhone that will come with a warranty and w/o the need to hack or jail-break.

Again, the preceding “negotiation scenario” was guesswork and I am no doubt wrong about many aspects of the on-going (or not) iPhone in China talks.